Domestic Fund Returns 'Soar'... Surpassing Overseas Funds

Investment Sentiment in Korean Market Rises
Last Year's Base Effect Helps Overcome Previous Struggles

[Asia Economy Reporter Oh Ju-yeon] Domestic equity funds, which lingered at the bottom in terms of returns last year, have undergone a remarkable transformation this year, outperforming overseas equity funds. While overseas equity funds showed returns in the 20% range last year, domestic equity funds recorded only around 3%, earning them a poor reputation. However, recently, they have shown the highest growth rate among country-specific fund returns.

According to financial information company FnGuide on the 15th, based on the closing price of the previous day, the average return of 775 overseas equity funds over the past month was 4.02%. During the same period, the average return of 961 domestic equity funds was 5.19%, which is 1.17 percentage points higher than that of overseas equity funds.

Narrowing the comparison period to the past week, the difference in returns became even more pronounced. The recent one-week return of overseas equity funds was 1.55%, whereas domestic equity funds recorded 4.02%, significantly ahead. This is a result of the KOSPI closing at 2238.88 on the 14th, up 3.9% from 2155.07 on the 6th. This figure greatly surpasses the fund returns of other countries.

By country, returns were as follows: Russia (2.71%), China (2.61%), Japan (1.84%), India (0.84%), Vietnam (0.35%), and Brazil (-3.25%). Regionally, North American funds (1.18%) and European funds (0.74%) also fell short of domestic equity fund returns.

The strong performance of domestic equity funds, which struggled throughout last year, is explained by the fact that investor sentiment toward the Korean market ranks among the highest among major countries. This year, amid the US-China trade negotiation stance and the rising trend of emerging market currencies improving the relative returns of emerging stock markets, the Korean market has become relatively more attractive due to last year's base effect.

Researcher Kim Dong-wan of Eugene Investment & Securities stated, "The Korean market experienced a larger decline in volatility due to calming compared to the increase in volatility caused by the expansion of Iran risk, relative to major countries," adding, "The KOSPI is responding more sensitively to positive news than negative news for the first time in a long while."

In terms of profit momentum, it is also more attractive than other countries. Researcher Han Dae-hoon of SK Securities said, "Last year marked the end of the era of KOSPI net profit reaching 100 trillion won for the first time in four years, but this year it is expected to increase again to 126 trillion won," adding, "Even considering the downward revision of annual net profit estimates, a growth effect of over 30% is expected, which is positive." Researcher Lee Kyung-min of Daishin Securities analyzed, "The deterioration of profit momentum last year will flow in as a base effect this year, supporting the upward momentum of the KOSPI," and noted, "Profit momentum is positioned among the global top ranks."